Thread For People Who Like Pricing!

I may be the only one but is there anyone else that actually LIKES to talk about pricing? Costing and pricing fascinates me and it seems like most of the time when people have pricing issues, people tell them to look at how much it costs in ingredients, how long it takes, etc.

These are great ways to get a price but is there anyone who likes to share how much they charged and why? Or how much they would charge? Just for the fun of it?

Sure, I'll throw my hat in!! I like to talk about pricing too, especially in more specific terms instead of being so general. I try to start with the cost of my ingredients and expenses, then figure an hourly rate for my actual time, plus include a little profit margin. I've found that it turns out about the same as if I were pricing it by the serving.

It was a three-layer 12" round of chocolate cake with buttercream icing, with a chocolate ball pan cake on top that was also covered in buttercream. I made the seven Pokemon figures from a gumpaste/fondant mixture, and I used piping gel for the pond. His name was handcut out of fondant (I don't have a cutting machine). I don't recall what I spent on baking, making the icing, assembling, etc., but I know I spent 6-7 hours on the modeled figures. I decided if anyone wanted a cake like this, I would charge $225 for it.

How much would you guys charge for a Xbox 360 cake to feed 15?It obviously wouldn't be true to size. I'm talking about the ones that are white. I had someone email me about one and I figured I'd probably have to start with a 9x13 and shave it some.

Well, I am assuming you are going to use fondant, so in my area, where ppl will pay, I charge $4 per slice and add in what I think totals up for ingredients and my time. I would charge $88. Hope this helps at all..

I find that if I mentally (or officially) set a minimum for my specialty cakes, I don't have to do the math every time. I have a $75 minimum on custom work, and I know what fits into that minimum. So when someone asks me for an xbox cake to feed 15, I think, "now how far above $75 should this cake be?"For me, anything remotely 3D will automatically start at $100 and go up very, very quickly. I do actually find pricing very interesting! At first it was intimidating, but now I find great joy in seeing those numbers add up!!!

Bridgette, that Xbox cake would be very tough. The problem is, there are certain cakes that, by their nature, are going to provide more servings than the customer's minimum requirement. Seems to me that Xbox cake is one of them. According to the Wilton chart, the 9x13 alone is 45 servings. So if you used the other poster's $4 per serving quote, that's $180. The problem comes when you try to tell a customer that a cake for their 15 guests will cost $180. Of course, they'll have extras, and it's quite a work of art, but that's what they will say in their heads.

Jenmat, do you also have a minimum for dessert cakes? I think it was Indydebi who said she wouldn't even turn her oven on for $50 (or was it more than that?). Seems like some of the other posters here have echoed that same policy.

Well, I am assuming you are going to use fondant, so in my area, where ppl will pay, I charge $4 per slice and add in what I think totals up for ingredients and my time. I would charge $88. Hope this helps at all..

Awesome, thanks! I quoted her $4 per serving of the cake before I carved it and for covered with fondant. She didn't reply so I assume it was too much. She said she wanted to stay around $60.

Bridgette, that Xbox cake would be very tough. The problem is, there are certain cakes that, by their nature, are going to provide more servings than the customer's minimum requirement. Seems to me that Xbox cake is one of them. According to the Wilton chart, the 9x13 alone is 45 servings.

Very true. That's how I originally felt when I read the email. That it wasn't possible. But that's for 2 layers. For one layer it would be 22 servings before it's carved but would also be short haha.

I figure this thread can be an area where we ask for help or opinions or just share what we charge. I know that we all have different economies but it's still interesting!

I also enjoy discussing this topic, I tend to apply the following formula: price = ingredient cost + labor cost + (annual overhead cost / estimated # of orders per year) + 15-30% profit margin. Calculating your true labor cost can be complicated, especially if you have multiple orders being processed at once and can take advantage of slack time (this is a must when renting a commercial kitchen).

We price single tier cakes at flat prices (starting at $44 for an 8") since most people looking for simpler cakes are used to seeing this type of pricing, multi-tier cakes are priced per serving starting at $5.

I like this topic Thinking about the Xbox cake..I just did one this weekend and charged $125 for it. I have a minimum of $100 for any type of carved cake...so thinking that this one didn't have TOO much carving and no super advanced details...$125 felt fair. It was time consuming, but not nearly as much so with larger or more elaborate cakes!! I wish I knew what others in my area charged for something like that!

BTW the XBox design and logo is copyrighted by Microsoft, so before you make that cake (and certainly before you sell it) you should have written permission from the copyright owner. We usually push this responsibility to the customer, so they can choose if they want to deal with the hassle of obtaining permission themselves or going with a different, non-infringing design.

Calculating your true labor cost can be complicated, especially if you have multiple orders being processed at once and can take advantage of slack time (this is a must when renting a commercial kitchen).

How do you make sure you have multiple orders? How did you start out? Did you get enough orders right away once you were a business? Did you advertise? Sorry for all the questions, but I see you on here a lot and value your opinions and experiences.

Quote:

Originally Posted by jason_kraft

We price single tier cakes at flat prices (starting at $44 for an 8") since most people looking for simpler cakes are used to seeing this type of pricing, multi-tier cakes are priced per serving starting at $5.

I decided to do this as well. My 8" start at $48 but I may be able to lower that a little once I buy more ingredients in larger quantities. Did you say you shop at restaurant depot? I just signed up and need to check it out!

I like this topic Thinking about the Xbox cake..I just did one this weekend and charged $125 for it. I have a minimum of $100 for any type of carved cake...so thinking that this one didn't have TOO much carving and no super advanced details...$125 felt fair. It was time consuming, but not nearly as much so with larger or more elaborate cakes!! I wish I knew what others in my area charged for something like that!

I can't wait till I can have a minimum that high AND get orders Are you going to post a pic?

How do you make sure you have multiple orders? How did you start out? Did you get enough orders right away once you were a business? Did you advertise?

After we finished our initial R&D (which was all done at home) and had a kitchen lined up we sent out an advertising blitz on Google, Yelp, and relevant special interest groups -- since we focused on allergy-friendly products we posted to local support groups for food allergies and Celiac. Things were slow for a few months, but once we started getting Yelp reviews and positive word of mouth we were able to fill 2-3 baking days a week with 5-10 orders/week and eventually had to start turning away new business.

Quote:

Quote:

Did you say you shop at restaurant depot? I just signed up and need to check it out!

We did shop at Restaurant Depot for quite a few items, but online retailers were sometimes considerably cheaper so I did quite a bit of procurement-related research.

It's a good idea to provide examples of flavor combinations, decorations, etc. but customers like the ability to customize the cake to their specs. If you simplify your WIP inventory (for example making large batches of vanilla BC and only coloring or flavoring as needed) this customization should cost you very little. On the other hand, if you plan on keeping inventory of finished goods for short notice pickups or you have retail shelves to stock then it makes more sense to have a few set products that can be made in advance.

While I think having a sound formula for calculating price based on expenses and profit margin is fundamental to a successful business, what intrigues me more is hearing what prices the market will support for a given cake. There are times when I do my math, come up with a final number, then I ask myself, "Is that RIGHT?" That's when I like to hear from other bakers about their prices on similar cakes. I understand that different geographical markets command different prices, so I realize the prices charged in San Francisco won't be the same as those charged in Podunk, TN, for example.

While I think having a sound formula for calculating price based on expenses and profit margin is fundamental to a successful business, what intrigues me more is hearing what prices the market will support for a given cake. There are times when I do my math, come up with a final number, then I ask myself, "Is that RIGHT?"

You're absolutely right, figuring out what the market will bear is an integral part to determining your pricing, but unless you live in a remote area there should be a variety of market segments that will each have a different price they can afford. If your calculated price is too high for the mainstream market, you can work on lowering your costs or target a premium/niche segment instead (or both).

My sister runs her own consulting firm-she made me sit down and list everything that goes into what we do"-a grand sugar production-"she calls it. No matter how small or large a prdouction the ingredients are the same. It comes out to $35.00 an hour to start. Remember the cost-sugar,chocolate, nuts and packaging (what if you have to custom make a base to accomadate your production) and gas goes up throughout the year. Everybody cannot do what we do. We produce edible art.Happy Baking and Decorating,Chef Angie

For 3D cakes I have a price minimum of $200. I do not do a per serving for 3D cakes, cause really, how accurate of a per serving can you come up with. What you can tell is if you have enough cake for a certain amount servings. With that in mind, I base 3D off how long I think it'll take to get the desired look with the amount of ingredients needed. And just so you know, I wouldn't do a 3D cake for say 5 people. It would be bigger and the price would cover that. And no, that doesn't cost more. It would be much harder for me to make a car for 5 people, then for 25. Can you imagine doing a car cake for 5 servings?!?

I like the word "dinky". That is the word I will use the next time someone asks me for a 3D cake for I don't know, 3. I was just talking to a caterer about silly request and " dinky" works just fine. Is that unprofessional of me?

How much are people paying themselves per hour? I'm trying to break down some of the prices talked about here. I'm thinking an 8" cake, simply decorated for $44 (which would be towards the high end of an accepted price range around here):

We're up to $24-$26 and still need a profit & hourly wage. If I spend no more than 2 hours on the cake (mixing batter, mixing icing, cutting & covering cake board, icing, etc), I'm getting paid a maximum of $6.50/hr to keep a profit of 20% ($7.40). Does that wage seem low to anyone else? Maybe I'm looking at this wrong!!

@ajwonka: That's where making use of slack time comes in. If you can get your labor down to one hour of hands-on time for a $44 cake (where you are working on other products while the cake is baking/cooling, and your frosting is already made up in bulk) the numbers will be more favorable.

In business school I took an elective class dedicated to operations management, it was a really interesting topic with applications to just about every business. The only downside is that I now mentally redesign every process I see in everyday life to maximize efficiency, then get frustrated when the actual process is far less efficient.

Also, as you ramp up production you can buy in bulk (which decreases your ingredient costs) and higher sales volume means lower overhead contribution per sale since most big overhead expenses are fixed.

Oh my goodness, pricing scares the ganache out of me. Right now I bake cakes for family & friends, so no profit for me yet. I plan on starting a home based business (legally) by the fall, and this is the biggest hurdle for me. I look at my cakes and feel I could make a decent amount on each of them, but I don't know how to compute the figures!!

When I started considering pricing, I deliberately ignored the market at first. I made spreadsheets for frosting, cake, fondant, specialty items, boards, supports, and boxes, and overhead. Everything that goes into one cake, I listed on spreadsheets.

From there I spent one really long day running around getting prices for everything. I put that into the spreadsheets and then calculated things like 1 t. of vanilla is 1/4 of a bottle (just an example, I don't know off-hand the exact percentage) and created formulas in the spreadsheet so that when I am pricing a cake, I can put in 1 in the amount column and the price column will calculate the cost automatically. From there, I created one last spreadsheet that pulls the totals from the others to calculate the final cost of the cake.

Since I work from home, I used my last job income as my labor cost. To me, it doesn't matter if I make 20, 30, 40 dollars an hour, as long as I could make as much as my last job per hour without the hassle of dealing with "the man." Not very professional, but it works for me right now.

Once all that was done, I started my market research. I looked at what everyone else around me is charging, what products they offered, their location, their overhead, and their branding. I looked at industry report, and I looked at the average costs of weddings and such in my area. I did not want to do this part first because I didn't want to subconsciously influence the numbers in my spreadsheet.

Still, my pricing was not finalized. I had to consider who were the most likely to buy my product. What is their income? What do they typically spend on custom items, on weddings, etc...? Is there a niche market I can fill? On and on and on, I considered and researched such things. I was lucky because I was also in college at that time and my college required a lot of team work and projects. Many classes required you to pick a type of business for the project. The other students didn't care what type we picked so I led them in the cake/party planning/catering direction. My business plan, marketing plan, PR plan, etc... for college all worked into my own plans for a cake business.

I also feel very lucky to have gotten that education as it has gone a long way towards preparing me to be a business owner. I cannot imagine even starting this process without that knowledge.

See how complicated the pricing question can be? This is why I don't participate in those threads. There are so many variables that go into it. Each area is different and for me to give an intelligent answer would require months of research.

Now I just have to keep up with price changes. Good grief, the ingredient price changes this past year have kept me hopping!

Now I just have to keep up with price changes. Good grief, the ingredient price changes this past year have kept me hopping!

That's probably the easiest part of pricing...just increase prices by 5% every year and you should be covered for cost increases across the board, at least until inflation starts ramping up (if the CPI starts rising >5% annually you'll want to stay 1-2% ahead).

Jason, a gallon of milk has gone from $1.99 to $2.49. That seems like a lot more than 5% to me.

I'm not being snarky, I'm saying that I'm not at all sure that simply increasing my ingredients costs by 5% is going to cut it right now. Sure, my vanilla is the same price so I know it evens out a bit, but I don't think it's enough to reflect the real cost of the increases.

There will always be short-term spikes that you can't account for, the main concern is long-term trends. That's the reason I suggest 5% and not the current inflation rate (3%). Plus, if you look at your total costs, the cost of milk is probably a tiny percentage...even if you used a gallon of milk in a $50 cake, with the increased milk cost the new price would be only 1.2% higher ($50.60).

Over the past 10 years the price of milk has increased by less than 5% annually.

True 'dat, Jason. I seem to be getting stuck in stereotypical old folk thinking, so to speak. If (in my mind) milk has always been $1.99 then $2.49 is ridiculous. If I bought my first house for $38,000 and the same house is $90,000; why that's outrageous! How can people afford anything these days! However, my first house was 20 years ago so why would it cost the same today? It didn't go from one to price to another suddenly, it happened incrementally over time.

Hubby's having the same problem. When he starts talking about "I remember when gas was 50 cents a gallon" I'm telling him to hush 'cause he sounds like an old man. lol

Although milk really has gone straight from one price to another (no incremental increases here that I've noticed), that's a short-term view. It's kind of like playing the stock market. If you look at the daily changes and react to it. you'll drive yourself crazy, make changes when it's unnecessary, and forget that it's the long term trends you want to pay attention to.

I thought I was being lazy not updating my pricing sheet more often. Turns out I'm just looking at the long term. lol

Still, my pricing was not finalized. I had to consider who were the most likely to buy my product. What is their income? What do they typically spend on custom items, on weddings, etc...? Is there a niche market I can fill? On and on and on, I considered and researched such things.

How do you find out what people spend on custom items and who to target? I understand how to look up their income, how much they spend on weddings and stuff but don't understand how to find out who to market except to look at their income.